<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For Quarter Ended Commission File Number:
SEPTEMBER 30, 2000 0-21026
------------------ -------
ROCKY SHOES & BOOTS, INC.
-------------------------
(Exact name of registrant as specified in its charter)
OHIO 31-1364046
---- ----------
(State of Incorporation) (IRS Employer Identification Number)
39 E. CANAL STREET
NELSONVILLE, OHIO 45764
-----------------------
(Address of principal executive offices)
(740) 753-1951
--------------
(Registrant's telephone number, including area code)
(Former name, former address, and former Fiscal year
if changed since last report.)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve (12) months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past ninety (90) days.
Yes X No
--- ---
4,489,215 common shares, no par value, outstanding at November 6, 2000
<PAGE> 2
ROCKY SHOES & BOOTS, INC. AND SUBSIDIARIES
FORM 10-Q
<TABLE>
INDEX
-----
<CAPTION>
PAGE
PART I. FINANCIAL INFORMATION NUMBER
<S> <C> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
September 30, 2000 (unaudited) and December 31, 1999 3
Unaudited Condensed Consolidated Statements of Operations
For the Three Months and Nine Months Ended September 30, 2000
and 1999 4
Unaudited Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2000 and 1999 5
Notes to Interim Unaudited Condensed Consolidated Financial
Statements 6 - 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9 - 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities and Use of Proceeds 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
EXHIBIT INDEX 17
</TABLE>
2
<PAGE> 3
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
ROCKY SHOES & BOOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30, 2000 December 31, 1999
(unaudited)
------------------ -----------------
<S> <C> <C>
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents $ 1,925,013 $ 2,330,324
Trade receivables - net 39,366,729 18,712,588
Other receivables 3,852,011 5,227,394
Inventories 42,162,237 32,573,067
Deferred income taxes 1,017,331 1,017,331
Prepaid expenses 1,816,021 1,222,914
------------ -----------
Total current assets 90,139,342 61,083,618
FIXED ASSETS - net 25,379,126 26,132,222
OTHER ASSETS 2,512,903 2,117,514
------------ -----------
TOTAL ASSETS $118,031,371 $89,333,354
============ ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable $ 13,062,373 $ 2,128,112
Current maturities - long term debt 12,595,188 8,599,897
Accrued taxes - other 609,112 412,721
Accrued salaries and wages 968,209 569,203
Accrued other 955,871 905,783
------------ -----------
Total current liabilities 28,190,753 12,615,716
LONG TERM DEBT-less current maturities 38,146,201 25,176,918
DEFERRED LIABILITIES 1,474,595 1,311,590
------------ -----------
TOTAL LIABILITIES 67,811,549 39,104,224
SHAREHOLDERS' EQUITY:
Common stock, no par value;
10,000,000 shares authorized;
issued and outstanding September 30, 2000 - 4,489,215
shares; December 31, 1999 - 4,489,215 shares 35,284,159 35,284,159
Retained earnings 14,935,663 14,944,971
------------ -----------
Total shareholders' equity 50,219,822 50,229,130
------------ -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $118,031,371 $89,333,354
============ ===========
</TABLE>
See notes to the unaudited condensed consolidated financial statements.
3
<PAGE> 4
<TABLE>
ROCKY SHOES & BOOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES $36,994,402 $34,458,907 $74,754,970 $71,282,065
COST OF GOODS SOLD 28,485,904 25,674,704 57,726,628 53,355,770
----------- ----------- ----------- -----------
GROSS MARGIN 8,508,498 8,784,203 17,028,342 17,926,295
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 5,658,184 5,394,236 15,037,646 13,344,182
----------- ----------- ----------- -----------
INCOME FROM OPERATIONS 2,850,314 3,389,967 1,990,696 4,582,113
OTHER INCOME AND (EXPENSES):
Interest expense (1,197,902) (800,611) (2,329,623) (1,851,291)
Other - net 146,060 4,731 326,119 246,090
----------- ----------- ----------- -----------
Total other - net (1,051,842) (795,880) 2,003,504 1,605,201
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES 1,798,472 2,594,087 (12,808) 2,976,912
INCOME TAX (BENEFIT) EXPENSE 535,500 775,866 (3,500) 893,015
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 1,262,972 $ 1,818,221 $ (9,308) $ 2,083,897
=========== =========== =========== ===========
NET INCOME (LOSS) PER SHARE
Basic $ 0.28 $ 0.40 $ (0.00) $ 0.44
=========== =========== =========== ===========
Diluted $ 0.28 $ 0.40 $ (0.00) $ 0.44
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic 4,489,215 4,554,317 4,489,215 4,765,509
=========== =========== =========== ===========
Diluted 4,489,921 4,593,675 4,489,215 4,786,436
=========== =========== =========== ===========
</TABLE>
See notes to the unaudited condensed consolidated financial statements.
4
<PAGE> 5
<TABLE>
ROCKY SHOES & BOOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Nine Months Ended
September 30,
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (9,308) $ 2,083,897
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 3,492,468 3,044,014
Deferred taxes and other (50,000)
Deferred compensation and pension - net 163,005 (99,727)
Loss on sale of fixed assets 667
Change in assets and liabilities:
Receivables (19,278,758) (22,536,835)
Inventories (9,589,170) (1,046,627)
Other current assets (593,107) (779,876)
Other assets (419,282) 4,997
Accounts payable 10,870,452 4,491,057
Accrued and other liabilities 645,485 1,014,469
------------ ------------
Net cash used in operating activities (14,717,548) (13,874,631)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (2,692,107) (7,786,725)
Proceeds from sale of fixed assets 39,770
------------ ------------
Net cash used in investing activities (2,652,337) (7,786,725)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt 81,725,969 40,102,000
Payments on debt (64,761,395) (19,819,509)
Purchase treasury stock (3,807,300)
Proceeds from exercise of stock options including
related income tax effect 9,000
------------ ------------
Net cash provided by financing activities 16,964,574 16,484,191
------------ ------------
DECREASE IN CASH AND CASH EQUIVALENTS (405,311) (5,177,165)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 2,330,324 7,232,876
------------ ------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD 1,925,013 $ 2,055,711
============ ============
</TABLE>
See notes to the unaudited condensed consolidated financial statements.
5
<PAGE> 6
ROCKY SHOES & BOOTS, INC.
AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL REPORTING
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments which are
necessary for a fair presentation of the financial results. All such
adjustments reflected in the interim consolidated financial statements
are considered to be of a normal and recurring nature. The results of
the operations and cash flows for the nine month periods ended
September 30, 2000 and 1999 are not necessarily indicative of the
expected results for the whole year. Accordingly, these financial
statements should be read in conjunction with the consolidated
financial statements and notes thereto contained in the Company's
Annual Report on Form 10-K for year ended December 31, 1999.
2. INVENTORIES
Inventories are comprised of the following:
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
------------------ -----------------
<S> <C> <C>
Raw materials $ 6,794,388 $ 4,133,520
Work-In-Process 2,202,892 2,128,738
Warehoused finished goods 30,037,034 24,110,469
Factory outlet finished goods 3,468,476 2,645,340
Reserve for obsolescence or lower of cost
or market (340,553) (445,000)
----------- -----------
Total $42,162,237 $32,573,067
=========== ===========
</TABLE>
3. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest and paid or (received) for Federal, state and
local income taxes was as follows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2000 1999
---- ----
<S> <C> <C>
Interest $ 2,386,016 $1,623,096
=========== ==========
Federal, state and local
income taxes - net $(2,020,726) $ 70,344
=========== ==========
</TABLE>
Accounts payable at September 30, 2000 and December 31, 1999 included a
total of $253,468 and $189,659, respectively, relating to the purchase
of fixed assets.
6
<PAGE> 7
4. PER SHARE INFORMATION
Basic earnings per share (EPS) is computed by dividing net income
available to common shareholders by the basic weighted average number
of common shares outstanding during each period. The diluted earnings
per share computation includes common share equivalents, when dilutive.
There are no adjustments to net income necessary in the calculation of
basic and diluted earnings per share.
A reconciliation of the shares used in the basic and diluted income per
common share computation for the three months and nine months ended
September 30, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic-Weighted average
shares outstanding 4,489,215 4,554,317 4,489,215 4,765,509
Diluted securities:
Stock options 706 39,358 0 20,927
--------- --------- --------- ---------
Diluted-weighted
average shares outstanding 4,489,921 4,593,675 4,489,215 4,786,436
========= ========= ========= =========
</TABLE>
5. ACCOUNTING STANDARDS
The Securities and Exchange Commission published Staff Accounting
Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial
Statements," SAB 101A and SAB 101B in December 1999, March 2000, and
June 2000, respectively. These bulletins summarize certain aspects of
the Commission's views in applying accounting principles generally
accepted in the United States of America to revenue recognition in
financial statements. The bulletins are effective no later than the
fourth fiscal quarter of the fiscal year beginning after December 15,
1999. Management has not yet completed its analysis of these bulletins
and their impact on the Company's financial statements and disclosures.
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities". In June
2000, the FASB issued SFAS No. 138, which amends certain provisions of
SFAS 133 to clarify four areas causing difficulties in implementation.
The amendment included expanding the normal purchase and sale exemption
for supply contracts, permitting the offsetting of certain intercompany
foreign currency derivatives and thus reducing the number of third
party derivatives, permitting hedge accounting for foreign-currency
denominated assets and liabilities, and redefining interest rate risk
to reduce sources of ineffectiveness. We have appointed a team to
implement SFAS 133 for the Company. This team has been implementing an
SFAS 133 compliant risk management information system, educating both
financial and non-financial personnel, inventorying embedded
derivatives and addressing various other
7
<PAGE> 8
SFAS 133 related issues. We will adopt SFAS 133 and the corresponding
amendments under SFAS 138 on January 1, 2001. SFAS 133, as amended by
SFAS 138, is not expected to have a material impact on the Company's
consolidated results of operations, financial position or cash flows.
6. DEBT AGREEMENT
On September 18, 2000, the Company entered into a three year loan and
security agreement with GMAC Business Credit, LLC extending its
revolving line of credit based on the collateral value of its accounts
receivable and inventory to a maximum of $50,000,000. The interest rate
is one-quarter percent (0.25%) per annum in excess of the prime rate.
The agreement expires September 17, 2003.
Any amounts borrowed under the agreement are secured by accounts
receivable, inventory, equipment, and intangible assets of the Company
and its domestic subsidiary (Lifestyle Footwear, Inc.). Additional
security includes 65% of capital stock of the Company's foreign
subsidiary (Five Star Enterprises, Inc.) and 100% of the capital stock
of the Company's domestic subsidiary.
As of September 30, 2000, the Company is in compliance with the loan
covenants which include financial covenants relating to EBITDA
(earnings before interest, taxes, and depreciation), net worth and
fixed charge coverage.
8
<PAGE> 9
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, information
derived from the Company's Unaudited Condensed Consolidated Financial
Statements, expressed as a percentage of net sales. The discussion that
follows the table should be read in conjunction with the Unaudited
Condensed Consolidated Financial Statements of the Company.
<TABLE>
PERCENTAGE OF NET SALES
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of Goods Sold 77.0% 74.5% 77.2% 74.9%
----- ----- ----- -----
Gross Margin 23.0% 25.5% 22.8% 25.1%
Selling, General and
Administrative Expenses 15.3% 15.7% 20.1% 18.7%
----- ----- ----- -----
Income from Operations 7.7% 9.8% 2.7% 6.4%
===== ===== ===== =====
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1999
Net Sales
Net sales for the quarter ended September 30, 2000, increased
$2,535,495, or 7.4% to $36,994,402 from $34,458,907 for the same period
a year ago. Net sales increased as the result of sales of the Company's
recently introduced Wild WolfTM by Rocky line of opening price point
footwear ($59-$79 at retail) and increased shipments of outdoor and
rubber footwear. This increase was partially offset by reduced
shipments of casual footwear, on which the Company reduced its emphasis
during third quarter 2000, and military boots that were produced for a
specific customer last year. Prices were approximately 2% higher for
the three months ended September 30, 2000 than during the comparable
period of the prior year.
Gross Margin
Gross margin for the quarter ended September 30, 2000 decreased
$275,705 to $8,508,498 from $8,784,203 for the same period a year ago.
As a percent of net sales, gross margin was 23.0% in third quarter 2000
versus 25.5% for the same period in 1999. During the first half of
2000, the Company consolidated its Puerto Rican manufacturing
operations into a single plant with greater capacity than its two
former facilities. The
9
<PAGE> 10
related moving and start up expenses resulted in lower absorption of
manufacturing overhead which was a substantial factor in the decrease
in gross margin.
The Company continued to shift manufacturing to its plants in Puerto
Rico and the Dominican Republic for third quarter 2000 versus last
year. This shift resulted in temporary production inefficiencies. Gross
margin is expected to benefit from these initiatives as the Company
realizes additional benefits from the manufacturing changes through
lower cost production in the Company's Caribbean factories combined
with increased production of sourced products.
Selling, General and Administrative Expenses
Selling, general, and administrative expenses (SG&A) were $5,658,184
for the three months ended September 30, 2000, or $263,948 higher than
the same period last year. Higher depreciation, as well as salaries,
fringe benefits, and travel for the casual footwear sales force,
represented most of the increase over third quarter 1999. The Company
reduced its emphasis on casual footwear before the end of third quarter
2000. Selling expenses will be more variable in the future due to the
elimination of the casual sales force. Due to higher third quarter 2000
sales, SG&A declined to 15.3% of net sales from 15.7% in 1999. Specific
plans have been implemented during 2000 to reduce SG&A as a percentage
of net sales versus a year ago. Factors contributing to this reduction
include, but are not limited to, improved efficiencies in the operation
of the new distribution center and realignment of the sales force with
increased emphasis on the Company's core product lines.
Interest Expense
Interest expense for the quarter ended September 30, 2000 increased
$397,291 or 49.6%, to $1,197,902 versus $800,611 for the same period a
year ago. The increase is a result of rising interest rates, increased
borrowings under the Company's line of credit and the completion of
mortgage financing for the Company's new distribution center,
warehouse, and corporate office building.
Income Taxes
Income taxes decreased $240,366, or 31.0%, to $535,500 for the three
months ended September 30, 2000, versus $775,866 for the same period a
year ago. The Company's effective tax rate decreased slightly to 29.8%
for second quarter 2000 from 30.0% in 1999. The decrease in the
Company's effective tax rate is due to more income earned in tax
jurisdictions with lower effective tax rates than in prior periods.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1999
Net Sales
Net sales for the nine months ended September 30, 2000 increased
$3,472,905 or 4.9% to
10
<PAGE> 11
$74,754,970 versus $71,282,065 for the same period a year ago. Net
sales increased as the result of sales of the Company's recently
introduced Wild WolfTM by Rocky line of opening price point footwear
and increased shipments of outdoor, rubber, and occupational footwear.
This increase was partially offset by reduced shipments of casual and
military footwear. Prices were approximately 2% higher for the first
nine months of 2000 than during the comparable period of the prior
year.
Gross Margin
Gross margin for the nine months ended September 30, 2000 decreased
$897,953, to $17,028,342 versus $17,926,295 for the same period a year
ago. As a percent of net sales, gross margin was 22.8% for the first
nine months of 2000 versus 25.1% for the same period a year ago. During
the first half of 2000, the Company consolidated its Puerto Rican
manufacturing operations into a single plant with greater capacity than
the two previous facilities. The related moving and start-up expenses
resulted in lower absorption of manufacturing overhead, which was a
substantial factor in the decrease in gross margin. It is anticipated
that gross margin will improve as the Company realizes benefits from
lower cost production in the Company's Caribbean factories, increased
sourcing and improved inventory management compared with last year.
Selling, General and Administrative Expenses
Selling, general, and administrative expenses (SG&A) for the nine
months ended September 30, 2000 were $15,037,646 compared with
$13,344,182 for the same period a year ago. As a percent of net sales,
SG&A was 20.1% in the first nine months of 2000 versus 18.7% for the
same period in 1999. The increase was primarily the result of higher
salaries, fringes, and related expenses for sales persons added
following first quarter 1999, tradeshow expenses, and costs associated
with developing the Company's key footwear categories. There was also
additional depreciation for the Company's new finished goods
distribution center, which was completed in December 1999. The Company
has been implementing plans during the year to control and reduce SG&A
expenses. Most of the benefits thus far were realized in lower
administrative expenses.
Interest Expense
Interest expense for the nine months ended September 30, 2000 increased
$478,332 or 25.8% to $2,329,623 versus $1,851,291 for the same period a
year ago. The increase is a result of rising interest rates, increased
borrowings under the Company's line of credit and the completion of
mortgage financing for the Company's new distribution center,
warehouse, and corporate office building.
Income Taxes
Income tax benefit increased for the nine months ended September 30,
2000 to $3,500 compared to an income tax expense of $893,015 for 1999.
The Company's effective tax benefit rate of 27.3% for the first three
quarters of 2000 compares with an effective tax rate of 29.9% for the
same period last year. The income tax benefit for the nine months
11
<PAGE> 12
of 2000 is primarily generated from the Company's domestic operations.
Liquidity and Capital Resources
The Company has principally funded its working capital requirements and
capital expenditures through borrowings under its line of credit and
other indebtedness. Working capital is primarily used to support
changes in accounts receivable and inventory as a result of the
Company's seasonal business cycle and business expansion. These
requirements are generally lowest in the months of January through
March of each year and highest during the months of May through October
of each year. In addition, the Company requires financing to support
additions to machinery, equipment and facilities as well as the
introduction of new footwear styles.
At September 30, 2000, the Company had working capital of $61,948,589
versus $48,467,902, at December 31, 1999. On September 18, 2000 the
Company completed a revolving line of credit agreement with maximum
borrowing limits of $50,000,000 subject to certain levels of accounts
receivable and inventory, which is $8,000,000 higher than the previous
agreement. It expires September 18, 2003. As of September 30, 2000, the
Company had borrowed $43,848,062 against its available line of credit
of $45,191,700.
The Company reacquired and retired 619,900 common shares for $3,807,300
under its share repurchase program during the nine month period ended
September 30, 1999.
Early in 2000, the Company completed mortgage financing with GE Capital
for three of its facilities totaling $6,300,000, with monthly payments
of $63,100 to 2014. The proceeds were used to reduce borrowings under
the revolving line of credit facility.
The Company's cash flow used in operations increased to $14,717,548 in
first nine months of 2000 from $13,874,631 for the same period in the
prior year. The primary factors affecting cash used in operations for
the first nine months of 2000 and 1999 were increases in accounts
receivable and inventories, which were partially offset by increases in
accounts payable and accrued expenses. All of these balance sheet
fluctuations are normal and reflect the seasonal nature of the
Company's business.
Inventory was 16% lower at $42,162,237 on September 30, 2000 versus
$48,156,638 as of the same date last year. Controlled production
schedules during the past year combined with improved inventory
management contributed to the favorable comparison. The total number of
pairs of footwear in inventory was below a year ago for both
manufactured and sourced products. The Company is building its
inventory of occupational footwear and certain rugged outdoor boots to
support increased demand.
The Company's centralized finished goods distribution center, which
became fully operational in January 2000, is an integral part of the
improved inventory management compared to third quarter 1999. The
current level of inventory reflects production activities consistent
with the anticipated needs to satisfy orders currently received and
normal reorders through the remainder of the 2000 Fall and Winter
selling season.
12
<PAGE> 13
The principal use of cash flows in investing activities for the first
nine months of both 2000 and 1999 has been for investment in property,
plant, and equipment. In the first nine months of 2000 these
expenditures were $2,652,337 or $5,134,388 below expenditures for the
same period in 1999. This reduction resulted from completion of the
Company's new distribution center in December 1999.
The Company's cash flows from financing activities reflect the net
increase or decrease in borrowings under its revolving credit facility
and new long-term mortgage facility to finance working capital
requirements and other operating capital expenditures. In addition,
during the first nine months of 1999, the Company acquired treasury
stock in the amount of $3,807,300.
Capital expenditures for 2000 are expected to be approximately
$3,200,000 for machinery and equipment to support increased production
as well as lasts, dies, and patterns for new footwear styles. This
amount is in response to the initial customer demand for Wild Wolf(TM)
by Rocky, a new line of footwear the Company introduced this year. The
Company believes it will be able to finance increased amounts and meet
operating expenditure requirements in 2000 through available cash on
hand, operating cash flows and borrowings under its line of credit.
Inflation
The Company cannot determine the precise effects of inflation; however,
inflation continues to have an influence on the cost of materials,
salaries, and employee benefits. The Company attempts to offset the
effects of inflation through increased selling prices, productivity
improvements, and reduction of costs.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995.
This report contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended, and
Section 27A of the Securities Act of 1933, as amended, which are
intended to be covered by the safe harbors created thereby. Those
statements include, but may not be limited to, all statements regarding
the intent, belief and expectations of the Company and its management,
and include statements in this Management's Discussion and Analysis of
Financial Condition and Results of Operations regarding the Company's
future gross margins (paragraphs 4 and 9), reduction in SG&A (paragraph
5), inventory management (paragraph 18), and ability to finance its
operations (paragraph 22). Investors are cautioned that such statements
involve risks and uncertainties, including, but not limited to, changes
in consumer demand, seasonality, impact of weather, competition,
reliance on suppliers, changing retailing trends, reliance on foreign
manufacturing, changes in tax rates, limited protection of proprietary
technology, and other risks, uncertainties and factors described in the
Company's most recent Annual Report on Form 10-K and other filings from
time to time with the Securities and Exchange Commission. One or more
of these factors have affected, and could in the future affect, the
Company's
13
<PAGE> 14
business and financial results and could cause actual results to differ
materially from plans and projections. Therefore, there can be no
assurance that the forward looking statements in this report will prove
to be accurate. In light of the significant uncertainties inherent in
the forward-looking statements included herein, the inclusion of such
information should not be regarded as a representation by the Company,
or any other person, that the objectives and plans of the Company will
be achieved. All forward-looking statements are based on information
presently available to the management of the Company. The Company
undertakes no obligation to publicly update or revise any
forward-looking statements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes since December 31, 1999.
14
<PAGE> 15
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
None
(b) Reports on Form 8-K.
Form 8-K, filed September 20, 2000, announcing the
Company's $50,000,000 credit facility.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROCKY SHOES & BOOTS, INC.
Date: November 13, 2000 By: /s/ David Fraedrich
-------------------
David Fraedrich, Executive Vice President,
Treasurer and Chief Financial Officer
(Duly Authorized Officer and Principal
Financial and Accounting Officer)
16
<PAGE> 17
ROCKY SHOES & BOOTS, INC.
AND SUBSIDIARIES
FORM 10-Q
EXHIBIT INDEX
EXHIBIT EXHIBIT
NUMBER DESCRIPTION PAGE NUMBER
--------------------------------------------------------------------------------
27 Financial Data Schedule
17
